From Chaos to Turbulence:Myths vs. Realities in the Economy, Markets and Policy
By Dave Livingston, Managing Principal, Llinlithgow Associates (www.llinlithgow.com)
Dave is a management consultant primarily focused on improving enterprise performance by coupling strategy with execution thru the design and implementation of workable, integrated management systems. He blogs on this and related issues in Economics, Markets & Investments and specific industries and companies atwww.llinlithwo.com/bizzx
, his BizzXceleration blog.Where you can keep current on the state of the Economy, the implications for Markets and read explorations into business performance for Industries and specific companies.
This collection of blog essays covers the period from August to November, 2009 as the Chaos inthe first half of the year gave way to Turbulence. That’s a critically important distinction as Chaos iswhen nothing is predictable and where you end up could be disastrous depending on minordifferences in where you started. In contrast turbulence is still a very disturbed environment,technically a collection of smaller-scale chaotic behaviors, but subject to overall patterns and flows.In other words what we experienced in this period was the re-emergence of more predictablebehaviors in the economy, largely as the result of effective and successful monetary and fiscalpolicy.In the process of laying out this evolution we dig into the structure and patterns of GDP andbusiness cycles, where the economy was at and is likely to go, the interactions between marketsand the economy as well as multiple delusions about the future that set into market outlooks andtackle multiple numbers of mythologies that were floated during this period as to what was going onand the implications for the future.While you might think this look back is dated in fact the machinery and long timespans detailedhere will determine the course of the economy for years to come. In particular the explorations ofDebt, Savings and Growth, the role of debt and the future of de-leveraging and the impacts ofTrade, Exchange Rates and trade balances will be things we wrestle with for the next decade.We also spent considerable time exploring the role and impact of government fiscal policy and thestrategic outlook for the US economy. It was government intervention, thru fiscal and monetarypolicy, that kept what could have been a disaster as we fell into an abyss from being much worsethan it could have been. An important point to learn is that the health of the economy is still utterlydependent on government support though we can look ahead to a tricky transition. The key to thattransition will be whether or not the economy reaches takeoff velocity and establishes a level ofself-sustaining growth, or whether it remains weak and vulnerable. It will, in any case, remainfragile and we’re facing a weak recovery with very poor job growth for years.In other words we lay out the groundwork behind the New Normal using machinery that you can,we hope, readily understand and re-apply.